How I built a portfolio of 35 rentals and $10k+ monthly cash flow

362 Replies

Anton,

Good post--thanks for the detail in your story. btw--I signed up recently for Dealcheck after reading about it first on this thread. Really liking the tool! would love a way to be able to include a target neighborhood or zip code in the search criteria section. Then the tool could send me email alerts after scanning the local MLS for listings that meet my investment criteria. That would be cool!

Marc Littmann

Longmont, CO

@Marc Littmann

Glad to hear you like it so far. Yes, we've been getting a lot of requests to allow a full-out MLS/property search based on criteria. It would be a big undertaking for us, but we do plan on working on it in the near future. We'll keep you posted on the progress!

@Anton Ivanov Thank you so much for sharing your story. It is greatly inspiring as we are starting out. I like it that you obtained all yours with conservative financing if I may say based on your saving strategy. It is very close to what we’ve aimed as we are also full time professional at day and want to get on real estate as a way to invest and preserve wealth

@Anton Ivanov

Congratulations! Your story is certainly inspiring! I found myself in a similar situation like you were back in 2014-2015. I'm 30, also went from a less than $40K call center job in 2014 to a data scientist position currently, tripling my salary, meanwhile my wife has a job contributing good W2 income. We also try to keep 5-6 months reserve in all units, all traditional, fixed rate financing with W2 income. I love your story, and felt a connected when you mentioned you went from a technician to SE.

But we have kid, so saving money is a little hard (compare to before), but finding time to do business is the hardest part, my last deal was done on the day when my son was born 18 months ago, and I haven't done a deal since. I recently got back to the market and started looking again. 

We had bad experience with property management companies - not many companies to choose from to begin with, we used one that checked all checklist with glorious reviews, but still didn't work out, so I want to pick up your brain on that - do you always tryout a few property managers to start with? I know you mentioned in previous post about having  a checklist on PMs and networking are the keys. I'd like to hear specific stories how you found yours if you don't mind sharing.

I've been avoiding property managers, so I invest locally and manage personally. With a full time W2 job and limited time, I've been focusing on higher end SFR, dealing with better quality tenants, and fewer tenants (as compared to multi-family).

Also, I want to pick your brain about just personal finance - why 50 units? I know you mentioned $180K as a goal - but I'd think with your 70% saving rule, you would be financially free with only 35 units that you currently have (or even 25-30 units). Is there a deeper reason for your number 50? 

Our family can't save 70%, but we currently save about 50% of take home pay (Cleveland is a cheap place to live). We have enough doors to quit our W2 job to make budget work comfortably, but not half enough doors to replace our salaries and benefits (pension, healthcare coverage, stock options, cash bonus and tuition reimbursement etc.). Due to our conservative nature, we kept going back and forth on the right timing to quit, and right number of doors needed. I certainly don't want to quit one W2 job just so I can over-work myself in another real estate job, and if there is another 2008-2009 coming, I want to keep my W2 job to finance more properties. Also, I'm in the same boat, I don't want to retire, if it was up to me, I'd like to start a company working on some big data analysis on housing markets and doing some predictive analysis, projecting how a REI deal can look in the future etc. I see you already started your own company utilizing your software engineering skill, thoughts about timing to leave your W2 job?

@Preston Lam

No problem and good luck to you guys as well!

@Joseph Mercer

No, I don't typically try out several PMs before finding one that I like (although I don't think there is anything wrong with that). All of the PMs I currently use I found through referrals from other investors. This has been the key for me. If you can find a company that is highly recommended by 2-3 other local investors, I think you're much more likely to find one that will work out. Feel free to send me a message and I can send you my "interview questions" as well.

The 50 unit goal originally came from a passive income target. My wife and I wanted around $150-200k in yearly passive income. Assuming around $250-$350 cash flow per unit/month, that's around 50 units that we'll need to get there. Since we got to 35 so quickly, we'll probably keep going to 65-75 units before retiring at this point.

We're on the same page as far as retirement goes - I want to keep working until I'm sure I won't have to get another job again. I also don't plan to do "real estate full time" after retirement - just live off the passive income from the rentals we bought.

My "W-2" job is actually another startup that I'm #2 employee in with considerable equity. They are likely to get bought out in the next few years and I don't want to leave before that.

Nice work and thanks for sharing.  "live like nobody else now, so later you can live and give like no one else" - Dave Ramsey

This is awesome and inspiring.  My husband and I are just starting out, but have a short-term goal to purchase 3 properties this year, and a long-term goal to own 30 (properties or units) in the next 10 years!!!  

Hey Anton, I am just getting into investing and I came across your post. Very inspiring! I noticed many investors us VA loans, is it worth serving in an institution just to gain the ability to use a VA loan? How much advantage do you gain?

@David Hall

Great quote!

@Nita Martin

Those are great goals, good luck to you guys!

@Dustin Thoms

The answer to this is quite long and I described some of my market selection criteria elsewhere in this post. 

But more specifically - Birmingham was a so-so market in terms of economy/population/jog growth 5 years ago, but the cash flow there was excellent. At the time most of my properties were more expensive and in better areas, so I wanted to diversify into somewhat lower class areas a bit.

Kansas City is the current market I invest in and in my opinion, it has a perfect combination of strong economy/population/job growth and relatively low home prices.

@Vladislav Usatenko

I would definitely not recommend joining the military just so you can have access to a VA loan. I would do it for other reasons. The FHA program is similar and is available to non-military members.

@Robert Mair

It's a very valid point - management will make or break your investment, both locally and out-of-state. I'd say the key things that helped me is to only work with property managers I was referred to by other investors and establishing a very strict set of checklists, guidelines, etc. that they operate under. Basically, I manage my PMs somewhat more than most people.

@Bryan P.

Thanks for checking in!

Things are going very good overall, we actually just closed on another 4-plex, so our total is just under 40 units.

We’re slowly rehabbing existing units at a rate of about 1 per month. About half way done so far. We typically replace the tenants and raise the rents during each turn.

I prefer this approach as opposed to doing all of the rehab up-front because it allows me to start collection cash flow from day one and use the cash flow to finance all of the rehabs instead of borrowing the money.

I wouldn’t say we’ve run into any major problems. With this many units there is always turnover, but nothing out of the ordinary.

I don't know if you've owed the 4-plexes long enough to know this ... but is the higher (expected) turnover rate worth scaling up faster vs. building slower with SFRs? I know from experience that turnovers are very costly and disrupt cash flow the most.

@Bryan P.

Based on my projections I’m not expecting the turnover to be that much higher than SFRs in a comparable area, but the level of efficiency and cost savings I’m getting with multi-families is definitely substantial.

I don’t necessarily think there is anything wrong with owning 50+ SFRs, I just don’t see myself doing that.

In fact, in the long-term, I would rather own 2-3 large apartment complexes as my entire portfolio.

PMs in different markets have told me that small MFs will have turnovers twice as often as SFRs for an average of 1.5 years vs. 3 years. I've experienced this myself so it seems to be true. I agree there is some cost savings and efficiencies with MFs ... one roof and exterior walls.

@Bryan P.

I haven't owned these properties long-enough to give you good statistics, but so far we haven't had major problems with turnovers.

Originally posted by @Bryan P. :

PMs in different markets have told me that small MFs will have turnovers twice as often as SFRs for an average of 1.5 years vs. 3 years. I've experienced this myself so it seems to be true. I agree there is some cost savings and efficiencies with MFs ... one roof and exterior walls.

Not sure on the exact ratio 1:2 in terms of turnovers, but I agree, generally MFs turn faster and they attract more transient tenants. That is why my CoC requirements for SFH is minimum 12% but MFH need to be 15-18%. Also I feel like the exit strategy is definitely another investor whether they be house hacking, 1031exc, or just buying an investment prop, whereas SFH I can upgrade the finishes to be more retail ready and sell it to a homebuyer.

@Anton Ivanov

I'm currently in the Navy. It's amazing to read your success after the Navy. My question is geared towards how you started. You said you only used financing methods such as VA Loan. I know the VA loan can me used multiple times, how were you able to re use the VA loan to build your portfolio? Is there a clause that states if it's rented out that you are eligible to use the full amount of the VA loan?

@Lavelle Govia

Between my wife and I (who also served), we've used the VA loan only 2 times - 1st to purchase a duplex that we house-hacked and then to purchase a primary residence where we now live.

To re-use the VA loan, you generally have two options, to my understanding. First, the VA loan has a total maximum "entitlement" that you can take out, which varies by state/county. Let's say for your city it's $400k total loan amount. You can theoretically buy a property with a $200k loan, live there for a few years, then buy another for $200k using a VA loan and move there instead. Provided you have a good reason for moving, you can keep the VA loan on the first property, which is now a rental.

Alternatively, in the above scenario, you can re-finance the first property into a conventional loan if the property appreciated in value and your equity is over 20%. That will essentially pay-off your first VA loan and free up your entire $400k allotment, which you can use on another property purchase.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here